Gas Prices Hold Steady as Summer Driving Season Enters Final Stretch

Monday, August 15, 2016

After dropping 54 of 55 days, the national average price of gasoline at the pump has held steady over the past week but has declined each of the past four days. The national average price for regular unleaded is $2.12 per gallon, which is the lowest price for this date since 2004. Today’s price is fractions of a penny more than one week ago, but is nine cents less than one month ago and 54 cents less than the same date last year.

Locally, South Jersey residents saw a small increase in gas prices compared to last week. Today’s price of $1.85 for a gallon of unleaded fuel is 2 cents per gallon higher than last week ($1.83), yet is 9 cents less than one month ago ($1.94). Today’s price is also 43 cents less per gallon than this time last year ($2.28).

As is frequently the case, the Midwest features the most dramatic pump price movement in the nation, including the only five states posting a weekly price change of more than a nickel. This past week’s direction was not uniform as prices in Michigan and Ohio have dropped at the same time prices in Kentucky, Indiana and Minnesota have jumped. Motorists in the Midwest are used to these sorts of price swings, as low supply and the resulting sensitivity to production and distribution issues have caused sharp price increases when refineries go offline, followed by rapid decline in prices when those issues are resolved.

The magnitude of price movement has been dampened somewhat this year. Last week’s Department of Energy report showed Midwestern supplies had dropped for the third consecutive week and the impact of an issue at the 430,000 barrel per day BP refinery in Whiting, Ind. is still evident. However, despite the decline resulting in a new 2016 low, gasoline stocks for the Midwest Petroleum Administration for Defense District (PADD 2) remain nearly ten percent higher than the same time last year. These robust year-over-year supply comparisons are evident nationwide and pave the way for the lowest pump prices for motorists in more than a decade to persist through Labor Day. Barring an unexpectedly dramatic shift over the next several weeks, national gasoline supplies are likely to end August at their highest level on record.

As of yesterday, approximately 41 percent of gas stations nationwide were selling gasoline for $2.00 per gallon or less, a slight increase from the 43 percent last week but a sharp contrast to the tenth of a percent below this threshold on this date in 2015. Eight percent of stations nationwide are selling gasoline for more than $2.50 per gallon, down slightly from the nine percent of stations one month ago and substantially from the 56 percent one year ago.

With gasoline supplies high and oil prices still relatively low, pump prices are likely to remain cheap through the rest of the summer and into the fall and could even dip back below $2.00 per gallon once the summer driving season is complete. However, a major market-moving event, like a hurricane or increasing crude oil costs, is not out of the question and could still offset this decline and temporarily drive pump prices higher.

Quick Stats

• Gas prices in twelve states are now below $2.00 per gallon: South Carolina ($1.82), Alabama ($1.86), Mississippi ($1.90), Tennessee ($1.90), New Jersey ($1.90), Virginia ($1.91), Arkansas ($1.94), Delaware ($1.97), Texas ($1.97), Louisiana ($1.97), Oklahoma ($1.99), and North Carolina ($1.996).
• Despite year-over-year savings, West Coast drivers continue to pay the most for gasoline, including the seven highest state averages and the only four states where drivers are paying an average of more than $2.50: Hawaii ($2.70), California ($2.62), Washington ($2.58), and Alaska ($2.57).

Mid-Atlantic and Northeast 

Pump prices in the Mid-Atlantic and Northeast continue to point lower and the region experienced some of the  most dramatic declines over the past month, with seven regions in the top ten: West Virginia (-16 cents), Connecticut (-16 cents), Massachusetts (-15 cents), Rhode Island (-15 cents), the District of Columbia (-14 cents), Pennsylvania (-14 cents), and Vermont (-13 cents). These sagging prices have been the result of plentiful gasoline supplies, which remain approximately 14 million barrels higher than this time last year.

Oil Market Dynamics

A key contributing factor to the stalling slide in retail gas prices has been the increase in crude oil prices over the past several weeks. While West Texas Intermediate crude oil is still trading substantially lower than recent years, prices have increased in August and are now trading at the highest level in a month. This increase has been attributed to reports that the Organization of Petroleum Exporting Countries will reconsider production limits by cartel members at its next meeting in an effort to boost oil prices and profits by curbing supply. OPEC’s next meeting is in Algeria in late September, and while agreement on a similar proposal at their last meeting was unsuccessful, member countries Ecuador and Venezuela are expected to again call for measures to cut production. If OPEC members agree to limit production, rising crude oil prices could offset or even reverse expected downward pressure on U.S. pump prices from tapering demand and cheaper seasonal blends. At the close of Friday’s formal trading session on the NYMEX WTI was up $1.00 to settle at $44.49 per barrel.

Drivers can find current gas prices along their route with the free AAA Mobile app for iPhone, iPad and Android. The app can also be used to map a route, find discounts, book a hotel and access AAA roadside assistance. Learn more at AAA.com/mobile.